Any currency war could put India in a tough spot

Wed Jan 30, 2013 1:48pm IST

Photos of yuan (top) and U.S. dollar banknotes are displayed at a money exchange in Hong Kong September 13, 2010. REUTERS/Bobby Yip/Files

Photos of yuan (top) and U.S. dollar banknotes are displayed at a money exchange in Hong Kong September 13, 2010.

Credit: Reuters/Bobby Yip/Files

Related Topics

Reuters Market Eye - Finance Minister P. Chidambaram says premature to say Japan's move to weaken yen constitutes a currency war, but urged Asian countries who are looking to stem volatile inflows to avoid depreciations of their currencies.

Chidambaram's comments must be seen in the context that India needs large inflows and a stronger rupee to narrow the current account deficit and to curb inflation.

Despite QE3-led strong inflows into domestic stocks, the rupee actually saw mild depreciation in 2012, with the central bank intervening to prop up the currency.

A currency war could put India in a tough spot, not following other countries in depreciating its currency could make its exports less competitive.

But the country also can't afford a weaker currency at a time when confidence in the rupee is not particularly strong because of the twin deficits.

(Reporting by Subhadip Sircar)

FILED UNDER:

Reuters Showcase

FMC-SEBI Merger

FMC-SEBI Merger

Regulatory shakeup could revive commodities markets   Full Article 

Market Eye

Market Eye

Nifty gains after 2015/16 budget focuses on growth, investment  Full Article 

China Interest Rates

China Interest Rates

China to cut benchmark interest rates by 25 basis points  Full Article 

Excise Duty

Excise Duty

Cigarette makers fall after budget hikes excise duty  Full Article 

Import Tax

Import Tax

India to raise import tax on steel to counter China threat  Full Article 

Greek Debt

Greek Debt

Greece seeks negotiations on ECB bond repayment  Full Article 

Economic Survey

Economic Survey

India in "sweet spot" of lower deficits, more growth  Full Article 

GM Corn

GM Corn

Monsanto says GM corn trial in final stage in India  Full Article 

Reuters India Mobile

Reuters India Mobile

Get the latest news on the go. Visit Reuters India on your mobile device  Full Coverage